TOWKAYS AND TYCOONS: THE
CHINESE IN INDONESIAN ECONOMIC
LIFE IN THE 1920s AND 1980s
Jamie Mackie
Since the nationalization in 1957-1958 of the Dutch business enterprises that had domi-
nated the colonial economy, including most of the country's largest plantations, mines,
banks, and business houses, many Chinese firms previously confined to an intermediate
position in the "colonial caste structure/' as Wertheim has called it,1 have been able to ad-
vance to the topmost ranks in the present economic structure of Indonesia. Collectively, they
now overshadow the previously dominant state sector made up largely of those national-
ized enterprises. The two largest Chinese firms, Liem Sioe Liong's vast conglomerate and
William Soeryadjaya's Astra Corporation, hold assets that were estimated to be worth Rp.
6.4 trillion and Rp. 2 trillion respectively (US$3.5 billion and $1.2 billion) in 1988, whereas
ten others are in the $40G-$700 million range and another one hundred or so exceed the $100
million mark.2 By any measure, international as well as local, the foremost of these men can
aptly be called tycoons, "businessmen of extraordinary wealth and power," in the dictionary
definition, whose wealth far exceeds that of their predecessors earlier in the century, Dutch
as well as Chinese. In contrast, none of the wealthiest Chinese towkay of the 1920s (a word
that refers rather indeterminately to "a Chinese big businessman," although not always an
especially rich one) could have been compared with the big Dutch capitalists of the colonial
era, apart from the almost legendary Oei Tiong Ham, to whom I will return shortly.3
Most explanations of how and why this transformation has occurred tend to fall some-
where between two rival camps. On one side are the structural and class interpretations,
*W. F. Wertheim, Indonesian Society in Transition (The Hague: Van Hoeve, 1956), chap. 6.
2Figures based on Warta Ekonomi, 5 (5), (July 1989): 72, and Conglomeration Indonesia. A Profile of Indonesia's Largest
Business Groupings, ed. Christianto Wibisono (Jakarta: Pusat Dokumentasi Business Indonesia, 1990). Although
all such estimates of company assets must be treated with reserve, these are probably adequate to indicate
approximate orders of magnitude.
^Definitions of towkay and tycoon are taken from Mary Somers-Heidhues, Southeast Asia's Chinese Minorities
(Hawthorn, Vic.: Longman Studies in Contemporary Southeast Asia, 1976), p. 114, and Webster's New Collegiate
Dictionary, respectively.
84 Jamie Mackie
which weight the close relationships the new tycoons have developed with the New Order
political and military authorities. At the other extreme are those explanations that stress
ethnic and cultural factors or simply take for granted that the commercial successes of the
Southeast Asian Chinese more generally are owing to their seemingly ingrained advantages
over their indigenous rivals in business skills and motivations. Both approaches have much
to be said for them, and both have their weaknesses; neither is entirely adequate in itself. A
complex interplay of ethnic and class factors has shaped the development of Chinese busi-
ness enterprises in Southeast Asia over the last century or more, which is not easily reduced
to one-dimensional generalizations at any stage. To understand the processes involved one
needs ideally to be able to trace the evolution of the economic roles of particular Chinese
businessmen, or broad groups of them, in the particular historical and sociopolitical contexts
of their times. That is not easy, however, for it is difficult to get adequate biographical or
historical information about even the better-known of them, let alone the more obscure and
poor Chinese who remain in the shadows. All one can do is draw inferences from the lives
of the few wealthy figures, both past and present, whose stories have been recorded.
In an attempt to sketch changes in the economic situation and roles of the Sino-Indone-
sian minority as a whole during this century, I will focus here on the two men about whose
careers information is most fully available, Oei Tiong Ham and Liem Sioe Liong.4 Because
both were outstandingly successful and wealthy, they cannot be regarded as representative
of Chinese businessmen in general, let alone of the entire Chinese minority. But if one can
identify the factors that made these men so successful, one may find clues to the successes or
failures of others.
One must be wary of the stereotypical notion that the Southeast Asian Chinese have
long been predominantly traders because some superior aptitude for commerce and small-
scale industry was lacking among the indigenous peoples. It was really only from about the
1920s onward that large numbers of Chinese in Indonesia began to move away from other
occupations, mostly less desirable ones, as in the case of thousands of plantation and mining
coolies, into what today are commonly regarded as their characteristic roles as small-scale
traders, warung operators, commodity dealers, and money lenders. There had, of course,
been significant numbers of Chinese in those roles in various parts of the colony long before
the 1920s, but they were then far less widely or thickly spread geographically, and fewer
engaged in petty trade than those in later periods. Since the 1920s, however, they have be-
come almost ubiquitous in those roles. The changes in occupations and economic roles that
unfolded between 1900 and 1930 (arrested by the onset of the Great Depression, which
caused the cessation of large-scale Chinese immigration) must be seen as the beginning of a
long process of adjustment and adaptation to constantly evolving economic and political
conditions that can be traced to the present day.
The splendid picture James Rush has given in this volume of the extensive networks or
pyramids of Chinese patrons and clients that were established around the great opium con-
cessions (farms) held by the opium "kings" in central and eastern Java in the latter half of
the nineteenth century provides us with a good starting point for this story slightly farther
back in time. Many of the lower-level participants in that business must have been petty
traders in small towns who dealt in opium inter alia through those networks. But because of
^he term "Sino-Indonesian," rather than "Indonesian Chinese," is used here in the contemporary context by
analogy with the generally accepted term "Sino-Thai" to stress nationality not ethnicity. For the years before the
1960s, when the dual nationality issue was still unresolved, the indefinite term "Chinese" is appropriate and
more convenient.
Towkays and Tycoons 85
their involvement in the networks (frequently illegal and semicriminal in character, Rush
observes) they were probably traders of a rather different type from the more modern shop-
house owners who operate independently—and in most cases honestly—and who fanned
out across entirely new areas of Java and the Outer Islands in the early decades of this cen-
tury. Rush notes that in addition to the kings who controlled the opium farms, and their
numerous retainers in the late nineteenth century, there were also many penniless newcom-
ers and small-scale vendors and tradespeople among the Chinese, who never earned more
than modest incomes or rose above menial occupations. But they were nowhere near as
numerous or widespread at that time as they became by the 1920s. The big money was in
opium until the economic crisis of the 1880s, the product that seems to have attracted the
most enterprising or acquisitive of the Chinese with substantial capital. Others, although not
many, were engaged in commodity trading and in cultivation, particularly of sugar and
tobacco, from much earlier in the century. Most were not yet large-scale operators, however,
and if big fortunes were made in these sectors, they did not lead to the emergence of fami-
lies as wealthy as those produced by the opium trade.
What Rush calls the "dance of collaboration" between the Chinese opium kings and the
local Dutch and Javanese officials, especially his observation that the former were located
physically close to the powerholders and "nested within the power structure," has much in
common with the kinds of relationships that prevail today between leading Chinese capital-
ists and Indonesian powerholders, both in Jakarta and in the provincial capitals and smaller
towns throughout the country. But this system disintegrated in the 1890s, he tells us, as the
opium farms collapsed financially, and the authority of the peranakan (locally born) elite
families waned under the impact of a new wave of totok (China-born) immigrants. The eco-
nomic roles of the Chinese and the character of the various Chinese communities changed
significantly over the next forty years as did the entire colonial economy, owing to the vig-
orous expansion of the Dutch plantation system and the much higher investment levels in
all fields between the 1890s and 1929.
Chinese Business in Indonesia in the 1920s
Patterns of Chinese business activity in many parts of the colony were transformed in
the years between the collapse of the opium farms in the 1880s and the 1920s, the last pros-
perous decade before the Great Depression, which brought a radically new set of changes.
This was a time of rapid increase in the Chinese population, owing to a high rate of immi-
gration, primarily of indentured laborers for the Sumatran plantation industries.5 One result
was a widening rift within Chinese society between the peranakan and totok communities,
both political and economic. At the same time, the dramatic expansion of the Dutch-domi-
nated plantation economy severely constrained the scope of operation for the existing Chi-
nese planters in the sugar and tobacco industries, although it opened up other trading
opportunities for them as the plantation frontier expanded into new areas of Java and
Sumatra. It was directly associated with an increase in the number of small Chinese waning
owners scattered throughout the archipelago. A detailed diachronic account of the economic
processes and sociocultural dynamics underlying the changes then taking place would be
an illuminating supplement to the several rather static accounts available of Chinese
business activities in the last years before World War II. A few of the more prominent
individuals who emerged as business leaders are identifiable, but, with the exception of the
SThe Chinese population of the colony rose from 344,000 to 800,000 between 1880 and 1920, then to 1,233,000 in
1930. For fuller details, see J. A. C. Mackie, 'The Geographical Dispersal and Occupations of the Indonesian Chi-
nese, 1900-1930," Asian Culture (Singapore), 14 (April 1990): 5-22.
86 Jamie Mackie
biggest towkays like Oei Tiong Ham, Tjong A Fie, and a handful of others, little is known of
their business careers.
The disintegration at this time of the symbiotic relationship between wealthy Chinese
businessmen and colonial officials noted by Rush was attributable not just to the collapse of
the opium kings but also to the fact that the Chinese now found themselves more generally
under pressure, even under attack, by the Dutch authorities as exploiters of the native peo-
ple, a popular theme of Ethical Policy reformers. The point can be carried even farther into
the present century. The Chinese minority was regarded with hostility, or at least suspicion,
by the various state authorities in Indonesia not only through the last half-century of colo-
nial rule but also throughout the next thirty years of Japanese occupation, the revolution,
and the early years of independence. Only since the 1970s has something like that earlier
symbiotic relationship with the ruling elite been reestablished. The general thrust of gov-
ernment policy during the period of rapid expansion of the Dutch plantation economy be-
tween 1900 and 1930 was to exclude Chinese and indigenous producers from participation
in that sector lest they disturb the Dutch planters7 access to land, labor, and markets at
minimum costs.
Only one Chinese firm succeeded in competing with the Dutch on their own ground at
this time, the Oei Tiong Ham Concern. Its story throws light on the scope of and limits upon
Chinese big business during that late colonial period of rapid economic expansion, although
Oei was quite unlike other Chinese businesssmen of that time in many respects. In his early
years he was one of the last of the old-style opium kings, yet he soon transformed himself
into a new-style modern capitalist using business techniques similar to those of the Dutch.
Oei thus became one of the few Chinese who survived in the fiercely competitive business
of sugar cultivation; he also succeeded in establishing a set of mills that were among the
most modern and efficient in the colony, which at the time was the most technically ad-
vanced sugar producer in the world. He was a remarkably innovative and forward-looking
businessman by any standard.
Born in Semarang in 1866, Oei Tiong Ham was the son of a moderately well-to-do, edu-
cated Chinese who had fled to Java not long before, after the collapse of the Taiping rebel-
lion in which he had participated. Oei's father, although penniless on his arrival in Sema-
rang, was soon able to build his sugar trading company, Kian Guan. This firm persisted as
the core component of the family business until the 1950s, a record in longevity for a major
Indonesian Chinese firm. His son, Oei Tiong Ham, was brought into the firm after a period
of Chinese-language schooling. By the age of twenty-four, after being appointed lieutenant
of the Chinese in Semarang, he was not only managing the firm but was also involved in the
opium farm business, presumably by virtue of the standing of his family at that time.6
The early stages of Oei Tiong Ham's career and the reasons for his initial success are still
obscure. There are several legendary stories about him during this period: that he was a
heavy gambler who nearly lost a large sum of his father's money at one point but was saved
by the generosity of an old Chinese lady who had confidence in him; and that he was
bequeathed a substantial legacy by an old German living in one of his father's houses in
Semarang who had taken a liking to him, which enabled him to purchase his first sugar
plantation. Regardless of the truth or fantasy behind these anecdotes, it is clear that the most
important of these early steps in career advancement must have been his decision to buy
several sugar plantations in the early 1890s at a time when the industry was just beginning
6A useful set of biographical studies on which I have drawn here is compiled in Yoshihara Kunio, ed., Oei Tiong
Ham Concern: the First Business Empire of Southeast Asia (Kyoto: Centre for Southeast Asian Studies, 1989).
Tσwkays and Tycoons 87
to emerge from its severe 1880s slump, while values were still depressed. In the following
years, sugar prices, demand, and production rose steadily so that the five plantations he
acquired soon became the basis of a strong, well-integrated group of companies extending
from sugar production and trading to a shipping company, warehouses, a bank, and over-
seas trading offices. It seems unlikely that the opium farm was an especially critical element
in his growing fortune because the opium trade was declining by the 1890s. In any case, his
family was already quite well off, so the capital needed to build up his business enterprise
was not difficult to acquire. But what made him such an outstanding businessman for his
time was the way he ran his business once he got started, for in this he was quite untypical
of other Chinese businessmen of the late colonial era.
The key factor in his commercial success seems to have been an awareness of the need to
adopt Dutch business methods and technical skills combined with a shrewd sense of timing
in his purchases and sales. In the latter respect he was perhaps not very different from other
Chinese traders of his time, but he was far ahead of them in the former (although it is puz-
zling that no others followed him on that score). One of his mills was the first in Java to be
electrified. He employed Dutch mill technicians, accountants, and lawyers extensively, and
also used Dutch-trained Chinese with similar qualifications in due course. He avoided ex-
cessive diversification into activities unrelated to his sugar-based enterprise, although Kian
Guan's overseas trading interests expanded and diversified considerably after World War I.
Oei Tiong Ham's relations with the Dutch authorities appear to have been reasonably
cordial but never particularly close, not at all comparable with the symbiotic relationships
with national political leaders that later developed in the 1970s and 1980s. He did not speak
Dutch and appears not to have associated socially with Dutch officials in Semarang,
although he entertained lavishly, including visiting state guests such as King Chula-
longkorn. Yet he received little help from the government and was sufficiently outraged by
its imposition of a stiff excess profits tax on him after he had made a killing from the steep
increase in sugar prices during World War I that he moved permanently to Singapore in
protest. He died there, still in his fifties, in 1924.
Although the Oei Tiong Ham Concern survived his death and continued to operate into
the 1950s under the leadership of the two most competent of his many sons (he had twenty-
five children in all), it gradually became a less successful business enterprise and was finally
nationalized in 1961 after running into political problems with the Sukarno government. It
survived the difficult years of depression, World War II, and the struggle for independence
that followed with only moderate setbacks but faced increasing problems in adapting to the
radically different conditions that emerged after independence. Above all, it was weakened
at that critical juncture by the universal problem of generational change within a Chinese
family firm, which gave rise to debilitating intrafamily disputes in the 1950s over matters of
control and business strategy. It is hard to avoid the conclusion that leadership and per-
sonality factors were crucially important in both the rise and decline of this first great Indo-
nesian Chinese corporate enterprise.
None of the other leading Chinese merchant families of the early twentieth century
achieved anything like the eminence of Oei Tiong Ham. His nearest rival was Kwik Hoo
Tong, a very successful trader in sugar and other agricultural commodities during the boom
years of the 1920s (until he went bankrupt) also based in Semarang. (The prominence of
Semarang Chinese at that time is interesting, for the only Chinese firms that actually culti-
vated plantation crops in East Java, where the biggest Dutch agricultural enterprises were
concentrated, seem to have been much smaller than those in Central Java.) Kwik's company
did not compete directly with modern Dutch enterprises in plantation agriculture, however.
88 Jamie Mackίe
He was more an old-style towkay than a modern tycoon. Much the same could be said of
the famous Tjong A Fie, an influential Kapίtien der Chίneezen in Medan, who had diverse
business interests and close relations with the Dutch local authorities but no particular and
enduring base to his enterprise comparable to that of Oei.7
A few Chinese planters cultivated sugar and other plantation crops in Java on a small
scale until the 1920s, but none approached the stature of the Oei Tiong Ham Concern. The
expansion of large Dutch corporate plantations from the 1880s on crippled the embryonic
class of Chinese sugar and tobacco planters who had previously been able to compete
against Dutch planters in significant numbers at a time when most of those enterprises were
quite small and rudimentary, generally between 17
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